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Model Citizenship: The Supreme Court Redefines Principal
Place of Business
“The most important omission on the part of the drafters of the [Judiciary
Act of 1789] . . . an omission which had most grave results and which
necessitated decisions tantamount to judicial legislation by the Supreme
Court—was the neglect to make any provision regarding jurisdiction as to
corporations.”1
I. INTRODUCTION
In the 2010 Supreme Court decision of Hertz Corp. v. Friend,2 the Court
definitively interpreted the language of 28 U.S.C. § 1332, establishing binding
precedent for determining corporate citizenship for the purposes of federal
diversity jurisdiction.3 While § 1332 clearly specified that a corporation is a
citizen of its state of incorporation, the second aspect of the corporate
citizenship test, its “principal place of business,” remained ambiguous, thereby
precipitating the need for judicial clarification. The Court had not previously
considered the statute, leaving the circuits to formulate their own
interpretations. Prior to Hertz, there were no fewer than four variations in
application of the language in § 1332 to determine a corporation’s citizenship.4
Specifically, the Seventh Circuit created the “nerve center test,” deeming a
corporation’s principal place of business to be where most of the corporation’s
decisions are made.5 The Ninth Circuit developed a “place of operations test”
that identified the state where most of a corporation’s business activities
occurred as its principal place of business.6 The Third Circuit applied a “center
1. Charles Warren, New Light on the History of the Federal Judiciary Act of 1789, 37 HARV. L. REV. 49,
89 (1923).
2. 130 S. Ct. 1181 (2010).
3. See id. at 1186, 1192 (setting forth nerve center test as new standard to determine corporation’s
principal place of business); see also infra Part II.E (detailing facts and holding in Hertz).
4. See Petition for Writ of Certiorari, Hertz, 130 S. Ct. 1181 (No. 08-1107), 2009 WL 559328, at *3.
5. See Kanzelberger v. Kanzelberger, 782 F.2d 774, 777 (7th Cir. 1986) (declaring applicable circuit test
for principal place of business as nerve center). One court applying the test noted that the “nerve center is [the]
place where officers work[,] where corporate records [are] kept, [and] where orders [are] received and filled.”
See Metro. Life Ins. Co. v. Cammon, No. 88 C 5549, 1990 WL 44687, at *8 (N.D. Ill. Apr. 6, 1990) (citing
Kanzelberger, 782 F.2d at 777) (applying determinative components of nerve center test).
6. See Indus. Tectonics, Inc. v. Aero Alloy, 912 F.2d 1090, 1094 (9th Cir. 1990) (describing reasoning
and elements of place of operations test). The court noted that the nerve center test should only apply when no
single state contains a “substantial predominance” of the corporation’s business activities. See id. The
determining factors in a place of operations analysis include: the location of the corporation’s real estate,
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of corporate activities test,” holding the state where the majority of a business’s
activities took place as the location of corporate citizenship.7 Further
complicating the matter, the Fifth, Sixth, Eight, Tenth, and Eleventh Circuits
each applied a “totality of the circumstances test” that evaluated all aspects of
the corporation to determine a corporation’s principal place of business.8 This
inconsistency as to the mechanics of deciding corporate citizenship was the
result of the Supreme Court’s failure to definitively interpret the language of §
1332—the critical statute for determining a corporation’s principal place of
business—in spite of several high profile circuit cases.9 By hearing Hertz, the
Court finally accepted the invitation to conclusively declare the proper
interpretation of § 1332. In Hertz, relying on a careful reading of the language
of § 1332, the Court adopted the nerve center test, reasoning that it best accords
with the legislative intent of the statute.10
This Note will explore the evolution of diversity jurisdiction as it relates to
corporations and the state of the law after Hertz. Part II.A discusses the
constitutional origins of diversity jurisdiction, and Part II.B details the
progression of the case law thereafter. Part II.C outlines various statutory
modifications to diversity jurisdiction, while Part II.D presents the four-way
circuit split prior to Hertz. Finally, Part II.E summarizes the Hertz opinion
itself. With this historical background in place, Part III analyzes the decision in
Hertz in light of the legislative history of diversity jurisdiction, its
constitutional conception, and the administrative concerns of today’s federal
court system.
II. HISTORY
A. Constitutional Origins
At the time of the Constitutional Convention, each of the states had their
equipment, inventory, and operations offices; the dispersion of employees; the distribution of gross income to
various facets of the business; and the site of production, sales, and shipping for the organization. See
Homestead Log Co. v. Square D Co., 555 F. Supp. 1056, 1057-58 (D. Idaho 1983) (outlining considerations to
determine place of operations).
7. See Kelly v. U.S. Steel Corp., 284 F.2d 850, 854 (3d Cir. 1960) (reasoning business’s activities, not
location of directors’ meeting, indicative of principal place of business).
8. See infra notes 82-87 and accompanying text (detailing totality of circumstances test, which embodies
features from both nerve center and activities tests).
9. See generally Davis v. HSBC Bank Nev., N.A., 557 F.3d 1026 (9th. Cir. 2009) (applying place of
operations test to reject class action plaintiffs contention of local controversy); Tosco Corp. v. Cmtys. for a
Better Env’t, 236 F.3d 495 (9th Cir. 2001) (dismissing plaintiff corporation’s diversity action for lack of
jurisdiction).
10. See Hertz Corp. v. Friend, 130 S. Ct. 1181, 1186, 1192 (2010) (setting forth nerve center test as new
uniform standard for determining principal place of business); see also infra Part II.E (discussing substance and
implications of Hertz holding).
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own long-tenured and fully functioning court systems.11 In considering the
need for a federal judiciary, the framers sought not to supplant these state
courts, but rather to augment them with a system equipped to handle certain
unique situations likely to arise within the newly formed union.12 To this end,
the framers of the Constitution provided that Congress may ordain and
Furthermore, this
establish federal courts as it deemed necessary.13
constitutional grant of power outlined the various subject matters appropriate
Conspicuous among the available subject matter
for such courts.14
authorizations was the provision that Congress could designate the federal
courts to hear controversies between citizens of different states.15
Passed by the nation’s first Congress, the Judiciary Act of 1789 (Judiciary
Act) established the federal judiciary and gave jurisdiction to the new federal
courts concurrent with the state courts in:
all suits of a civil nature at common law or in equity, where the matter in
dispute exceeds, exclusive of costs, the sum or value of five hundred dollars,
and . . . the suit is between a citizen of the State where the suit is brought, and a
16
citizen of another State.
Today, Congress’s statutory grant giving effect to this authority is found in §
1332 of the United States Code.17
11. See Henry J. Friendly, The Historic Basis of Diversity Jurisdiction, 41 HARV. L. REV. 483, 487-97
(1928) (discussing conflict between emergence of federal tribunal and existing state courts).
12. See id. (providing framers’ views of role of federal judiciary).
13. See U.S. CONST. art. III, § 1. “The judicial Power of the United States, shall be vested in one supreme
Court, and in such inferior Courts as the Congress may from time to time ordain and establish.” Id. Each of
the four proposals considered at the Constitutional Convention for what would eventually become the United
States Constitution, contained provisions for a federal judiciary; only one of these proposals, however—the
famous Virginia Plan—made reference to cases in which “citizens of other States” may be interested. See
James William Moore & Donald T. Weckstein, Diversity Jurisdiction: Past, Present, and Future, 43 TEX. L.
REV. 1, 2-3 (1964) (noting various schemes for structuring new federal judiciary discussed at Constitutional
Convention).
14. See U.S. CONST. art. III, § 2, cl. 1 (outlining subject matter jurisdiction for federal courts). “The
judicial Power shall extend to all Cases, in Law and Equity, arising under this Constitution . . . to Controversies
between two or more States; between a State and Citizens of another State; between Citizens of different
States . . . .” Id.
15. See id. (granting permission for judiciary to handle conflicts arising from individuals of separate
states). The notion of diversity jurisdiction, and indeed many aspects of the anticipated federal judiciary, were
first proposed in the Virginia Plan. See Friendly, supra note 11, at 484-92; Moore & Weckstein, supra note 13,
at 2-4.
16. See Judiciary Act of 1789, ch. 20, § 11, 1 Stat. 73, 78-79 (1789) (establishing parameters of federal
judiciary’s authority).
17. 28 U.S.C. § 1332 (2006); see also Turner v. Bank of N. Am., 4 U.S. 8, 9 (1799) (describing federal
jurisdiction as special and exception to state courts’ general jurisdiction).
Justice Crase explained:
The notion has frequently been entertained, that the federal courts derive their judicial power
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It is widely accepted that the purpose of diversity jurisdiction and its
immediate congressional implementation was to address the fear that state
courts would be prejudiced against out-of-state litigants when those individuals
were opposed by an in-stater.18 Nonetheless, there remain competing views as
to the motivation behind its inclusion in the Judiciary Act.19 Indeed, even prior
to passing the Judiciary Act, many favored some manner of diversity
jurisdiction to alleviate concerns that the individual states’ legislatures might
become too active, a notion not strictly concerned with litigation against out-ofstaters.20 Regardless, it is clear that one early effect of diversity jurisdiction,
intended or otherwise, was to foster the development of interstate commerce
within a burgeoning union of localized and self-interested state governments
through the stability of a federal tribunal.21
Interestingly, although it has remained a major point of contention in
procedural law since its inception, diversity jurisdiction has the somewhat
curious distinction of being rather lethargically defended by those who
Notably, at the Virginia Convention, James Madison
proffered it.22
commented: “I will not say [diversity jurisdiction] is a matter of much
immediately from the constitution; but the political truth is that the disposal of the judicial power
(except in a few specified instances) belongs to congress. If congress has given the power to this
court, we possess it, not otherwise: and if congress has not given the power to us, or to any other
court, it still remains at the legislative disposal.
Id. at 9 n.(a).
18. See 13E CHARLES ALAN WRIGHT ET AL., FEDERAL PRACTICE AND PROCEDURE § 3601 (3d ed. 2010)
(explaining history and principal reason behind diversity jurisdiction). The typical view is that the framers
established diversity jurisdiction to provide a forum to resolve conflicts between citizens of different states that
would be free from local prejudice or influence. See Moore & Weckstein, supra note 13, at 15 (setting forth
history of constitutional provision of diversity jurisdiction). Many members of Congress believed that the
courts of a state may favor their own citizens, and that bias against out—of—staters could therefore become
embedded in the judgment of a state court, and yet not be sufficiently apparent to be made the basis of a federal
claim. See Burford v. Sun Oil Co., 319 U.S. 315, 336 (1943) (Frankfurter, J., dissenting) (providing reasons
Congress granted diversity jurisdiction). As Professor Warren noted, “[t]he chief and only real reason for this
diverse citizenship jurisdiction was to afford a tribunal in which a foreigner or citizen of another State might
have the law administered free from the local prejudices.” Warren, supra note 1, at 83 (discussing support for
establishing diversity jurisdiction). Professor Warren further commented, in no uncertain terms, that “[t]here is
not a trace of any other purpose . . . to be found in any of the arguments made in 1787-1789 as to this
[diversity] jurisdiction.” Id.
19. See Warren, supra note 1, at 82 (detailing divergent arguments in favor of implementing diversity
jurisdiction).
20. See WRIGHT ET AL., supra note 18, § 3601 (discussing various concerns giving rise to notion of
diversity jurisdiction). Shortly after independence, the state legislatures became increasingly active and many
Americans feared that such legislation served the special interests of some groups at the expense of others. See
Donald Elfenbein, The Myth of Conservatism as a Constitutional Philosophy, 71 IOWA L. REV. 401, 472-73
(1986) (discussing specific concerns Congress addressed by instituting diversity jurisdiction).
21. See Moore & Weckstein, supra note 13, at 16-17 (suggesting creation of federal judiciary served
commercial interests by and between states).
22. See Warren, supra note 1, at 81 (noting apathy on behalf of drafters in contesting attacks upon
diversity jurisdiction).
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importance.”23 Similarly, John Marshall remarked: “Were I to contend that
this was necessary in all cases and that the government without it would be
defective, I should not use my own judgment.”24 Even so, the concept survived
repeated attacks by the Anti-Federalists and was included in the final version of
the Judiciary Act, which remains in effect today.25
B. Evolution of Diversity Jurisdiction Through Case Law
The Supreme Court initially rejected the idea that a corporation was a citizen
eligible to invoke diversity jurisdiction.26 Chief Justice John Marshall declared
in no uncertain terms that an “invisible, intangible, and artificial being, that
mere legal entity, a corporation aggregate, is certainly not a citizen; and,
consequently, cannot sue or be sued in the courts of the United States.”27 This
attitude was apparently consistent with the intent of the drafters of the Judiciary
Act, who do not seem to have considered the citizenship of corporations.28
Likewise, the Constitution itself is silent on the issue of corporate citizenship.29
Nevertheless, in 1844, the Court turned abruptly in Louisville, Cincinnati, &
Charleston Railroad Co. v. Letson30 when it held that a corporation was an
entity apart from its shareholders and was indeed a citizen that could invoke or
be subject to diversity jurisdiction in the federal courts.31 Considering the
complete lack of precedent and a legislative history devoid of any reference to
corporate diversity, this turn marked the beginning of a series of decisions
23. See id. (quoting Madison’s meager defense against detractors of diversity jurisdiction).
24. See id. at 82 (indicating Marshall’s thoughts regarding creating diversity jurisdiction).
25. See id. at 79 (proffering final version of Judiciary Act narrowed jurisdiction of federal courts from
original rendition).
26. See Bank of U.S. v. Deveaux, 9 U.S. 61, 86 (1809) (rejecting view of corporation as natural person).
The Court maintained, however, that shareholders of a corporation could sue or be sued in the corporate name,
and jurisdiction would be determined by the citizenship of the natural persons who composed the corporation,
that is, each shareholder individually. See id. at 89-92 (inferring citizenship of corporation’s shareholders
involved in suit indicative of corporation’s own citizenship).
27. See id. at 86-87 (opining regarding nature of corporate entity).
28. See generally Warren, supra note 1 (noting absence of consideration for citizenship status of
corporations in and of themselves).
29. See U.S. CONST. (lacking method for determining citizenship of corporation); see also James W.
Moore & Donald T. Weckstein, Corporations and Diversity of Citizenship Jurisdiction: A Supreme Court
Fiction Revisited, 77 HARV. L. REV. 1426, 1427-30 (1964) (discussing absence of guidance from Constitution
regarding diversity jurisdiction resulted in Court’s examination of issue).
30. 43 U.S. 497 (1844).
31. See id. at 558 (stating corporations possess citizenship of state of incorporation). The Court noted that
the members of the corporation were not individual defendants in the suit; rather they were merely parties
interested in the outcome. See id. at 554. Consequently, the corporation could be sued in federal court as a
separate entity, consistent with the rule in Strawbridge v. Curtiss, 7 U.S. 267 (1806), notwithstanding the fact
that some shareholders were not personally diverse from the plaintiff. See Louisville, Cincinnati, & Charleston
R.R. Co., 43 U.S. at 554 (noting corporate entity as having citizenship distinct from its shareholders). See
generally Strawbridge, 7 U.S. 267 (demanding complete diversity of all parties in litigation to establish
diversity jurisdiction).
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considered by many to embody unwarranted judicial activism.32 In stark
contrast to its previous position, the Court, in an opinion delivered by Justice
James Wayne, declared that because a corporation is a distinct entity permitted
to conduct business in a given state, it should be considered a person, “although
an artificial person, [and] an inhabitant of the same state . . . capable of being
treated as a citizen of that state, as much as a natural person.”33
Nine years later, the Court decided Marshall v. Baltimore & Ohio Railroad
Co.,34 setting forth a holding that refined previous decisions and would endure
for more than 100 years.35 In Marshall, the Court held that persons acting on
behalf of a corporation or within the scope of a corporation’s business may be
considered a resident of the corporation’s state of incorporation, and that such
persons are subject to suit in that state as well.36 The Court reasoned that by its
nature as a pure legal entity, a corporation exists only by force of law;
therefore, a corporation must necessarily “dwell in the place of its creation”—
that is, the state of its incorporation.37 This effectively determined a
corporation’s citizenship not by explicitly deeming the corporation a citizen in
and of itself, but rather by relying upon the fictional presumption that all
shareholders, as parties to the corporation, were citizens of the state of
incorporation.38 The consequence of this decision, in effect, made corporations
citizens only of the state where they were incorporated.39 With the rise of the
chancery in Delaware and the expansion of interstate commerce, it became
increasingly common for corporations to conduct substantial business in states
other than where they were incorporated.40 It is essentially this evolution in
business that has brought about much of the difficulty surrounding diversity
jurisdiction.41
32. See Warren, supra note 1, at 89-90 (criticizing Court’s decision to repeatedly address concept of
corporate citizenship). One commentator considered many of the decisions as “tantamount to judicial
legislation by the Supreme Court.” See id.
33. See Louisville, Cincinnati, & Charleston R.R. Co., 43 U.S. at 558 (declaring nature of corporate entity
akin to natural person when considering state citizenship).
34. 57 U.S. 314 (1853).
35. See id. at 328 (holding shareholders of corporation citizens of state of incorporation in certain
situations).
36. See id. (ruling persons acting under corporate name citizens of state of incorporation).
37. See id. (quoting Bank of Augusta v. Earle, 38 U.S. 519 (1839)). The Court noted that because a
corporation must be able to sue and be sued, it must “exist” somewhere for jurisdictional purposes. See id.
(declaring corporation resident of its state of incorporation).
38. See Marshall, 57 U.S. at 327-28; Moore & Weckstein, supra note 29, at 1428 (discussing holding in
Marshall). Interestingly, the Court avoided declaring that a corporation was a citizen, instead adopting the
Deveaux approach of looking to the natural persons who composed the corporation to serve as catalysts for
determining citizenship. See Moore & Weckstein, supra note 29, at 1428.
39. See David A. Greher, Note, The Application of 28 U.S.C. § 1332(c)(1) to Alien Corporations: A Dual
Citizenship Analysis, 36 VA. J. INT’L L. 233, 239-40 (1995) (offering outcome of early diversity case law).
40. See generally William T. Quillen & Michael Hanrahan, A Short History of the Delaware Court of
Chancery—1792-1992, in COURT OF CHANCERY OF THE STATE OF DELAWARE—1792-1992 (1993), available
at http://courts.delaware.gov/Chancery/history.stm (providing history of Delaware Chancery Court).
41. See id. (discussing expansion of interstate commerce).
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In cases where jurisdiction is based on diversity of citizenship, federal courts
are thrust into a position where they must decide matters involving state law–a
complex problem that continues to evolve today.42 The Supreme Court’s 1842
decision in Swift v. Tyson43 held that federal courts hearing cases based on
diversity jurisdiction were not bound by the states’ common law.44 The rule in
Swift only required that the federal courts apply state statutory law, thereby
permitting the development of a new, general federal common law.45 This
decision is widely considered to have encouraged forum shopping by plaintiffs
as well as defendants, who possess the option to remove to federal court on
grounds of diversity.46 In 1938, the Supreme Court, in Erie Railroad Co. v.
Tompkins,47 overturned Swift and changed the way the federal courts handle
cases based on diversity by requiring the application of state law regardless of
how the federal court came to hear the case.48
C. Statutory Modifications Relating to Diversity Jurisdiction
Diversity jurisdiction was first codified in the Judicial Code of 1948 and has
subsequently been amended six times.49 Prior to 1958, and in accordance with
42. This is necessarily so; if jurisdiction is based on diversity jurisdiction, the case by definition lacks a
federal question.
43. 41 U.S. 1 (1842), overruled by Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938).
44. See id. at 18-19 (denying authority of state common law as binding in federal tribunals).
45. See id. (holding application of state authority by federal judiciary limited to “positive statutes of the
state”). In disregarding state common law, the Court noted: “[I]t will hardly be contended . . . that the
decisions of courts constitute laws. They are, at most, only evidence of what the laws are, and are not, of
themselves, laws.” See id. at 18.
46. See James M. Wolfson, Uniform Law and the Federal Courts Under the Erie Doctrine, 23 TEMP. L.Q.
404, 405 (1949-1950) (recognizing forum shopping by parties in federal and state courts following Swift
decision).
47. 304 U.S. 64 (1938).
48. See id. at 77-80 (overturning Swift and setting forth new mechanism to select applicable law in
diversity matters). In overruling Swift, the Court held:
Except in matters governed by the Federal Constitution or by acts of Congress, the law to be applied
in any case is the law of the state. And whether the law of the state shall be declared by its
Legislature in a statute or by its highest court in a decision is not a matter of federal concern. There
is no federal general common law.
Id. at 78; see also Guar. Trust Co. of N.Y. v. York, 326 U.S. 99, 112 (1945) (clarifying purpose of diversity
jurisdiction to provide non-citizens another tribunal, not different law). In Guaranty Trust Co., Justice
Frankfurter commented:
In essence, the intent of [the Erie] decision was to insure that, in all cases where a federal court is
exercising jurisdiction solely because of the diversity of citizenship of the parties, the outcome of the
litigation in the federal court should be substantially the same, so far as legal rules determine the
outcome of a litigation, as it would be if tried in a State court.
Guar. Trust Co., 326 U.S. at 110.
49. See WRIGHT ET AL., supra note 18, § 3601 (reciting origins and legislative history of diversity
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Marshall v. Baltimore & Ohio Railroad Co., the Supreme Court simply held
that corporations were citizens of the state where they were incorporated.50
Still, with the increasing use of the corporate model and the expansion of
interstate commerce, this rule posed a problem because a corporation could
incorporate in a state where it conducted zero business or corporate activity.51
This had the curious effect of making the corporation a citizen of a state where
it had no physical presence, while at the same time defining the corporation as
diverse from residents of a state where it conducted substantial business.52 In
amending § 1332, Congress considered the fact that, in some extreme cases, the
posture of corporate diversity law facilitated the fabrication of federal
jurisdiction by the dissolution and reincorporation of a corporate entity.53
In 1958, Congress attempted to eliminate these incongruities by amending §
1332 to include subsection (c), which more specifically defined the terms of a
corporation’s citizenship for diversity purposes.54 Following the 1958
amendment, § 1332 read: “a corporation shall be deemed to be a citizen of any
State by which it has been incorporated and of the State where it has its
principal place of business,” plainly intending that corporations might have
dual citizenship.55 Congress implemented the amendment to restrict the
availability of the federal courts in cases between what were effectively two
local parties, thereby eliminating many perceived abuses of diversity
jurisdiction, while concurrently easing the federal courts’ workload.56 The
jurisdiction).
50. See Marshall v. Balt. & Ohio R.R. Co., 57 U.S. 314, 328 (1853) (presenting holding of case
designating corporate citizenship as corporation’s location of incorporation); see also supra Part II.B (detailing
evolution of diversity jurisdiction through case law).
51. See infra note 52 and accompanying text (discussing reincorporation of corporate entity for
jurisdictional advantages).
52. See Black & White Taxicab & Transfer Co. v. Brown & Yellow Taxicab & Transfer Co., 276 U.S.
518, 523-24 (1928). In Black & White Taxicab, the respondent dissolved its Kentucky corporation and
reorganized its business in Tennessee to create valid diversity jurisdiction, notwithstanding the fact that its
entire operation was located in Kentucky. See id. (explaining facts regarding reincorporation in examining
corporation’s citizenship). This case is also an example of the application of the rule in Swift prior to its
reversal and illustrates the difficulty for federal courts in hearing state matters. See id. at 530 (stating federal
courts not bound by state common law as judges may apply independent judgment).
53. See S. REP. NO. 85-1830, at 20 (1958), reprinted in 1958 U.S.C.C.A.N. 3099, 3119 (raising issues of
federal corporate diversity jurisdiction arising in Black & White Taxicab case); see also Black & White Taxicab
& Transfer Co., 276 U.S. at 523-24 (explaining respondent’s efforts to reincorporate to have case decided in
federal court).
54. See 28 U.S.C. § 1332(c) (2006); see also Moore & Weckstein, supra note 13, at 11-12 (discussing
purpose and resulting effect of 1958 amendment).
55. See 28 U.S.C. § 1332(c)(1).
56. See S. REP. NO. 85-1830, at 3, 1958 U.S.C.C.A.N. at 3101-02 (listing issues amendment sought to
resolve); H.R. REP. NO. 85-1706, at 2-3 (1958); see also Note, A Corporation’s Principal Place of Business for
Purposes of Diversity Jurisdiction, 44 MINN. L. REV. 308, 310-14 (1959) (detailing reasons Congress adopted
1958 amendment). “This fiction of stamping a corporation a citizen of the state of its incorporation has given
rise to the evil whereby a local institution . . . is enabled to bring its litigation into the federal courts simply
because it has obtained a corporate charter from another state.” S. REP. NO. 85-1830, at 4, 1958 U.S.C.C.A.N.
at 3101-02 (minimizing emphasis on state of incorporation as sole means to determine corporate citizenship).
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amendment also served to finally establish and codify the doctrine and set forth
that a corporation is to be considered a natural person for the purposes of
citizenship.57
As implemented by the statute, the determination of corporate citizenship
based upon the entity’s principal place of business is analogous to a well—
established tenet of procedural law: determination of citizenship of a natural
person via the domicile test.58 Furthermore, the notion of designating a
corporate entity as a citizen of the state where it conducts the most significant
amount of its business seems consistent with the prejudicial concerns that
initially gave rise to diversity jurisdiction.59 That is, if a corporation is
sufficiently localized to have its principal place of business in a given state,
then in the event of in-state litigation, one would expect fears of prejudice to be
assuaged by the corporation’s pervasive presence within the community.60 By
deeming a corporation a citizen of both the state where it is incorporated and
the state where it has its principal place of business, it became unlikely that a
corporation would be diverse from the citizens of the state where it has its
highest profile.61 Corporations, therefore, have the potential to have dual
citizenship; if a corporation is incorporated in one state and has its principal
place of business in another, it will be a citizen of both states.62 Naturally then,
the implementation of the amendment demanded that the courts interpret
“principal place of business” to determine the state, other than its state of
incorporation, of which a corporation was a citizen.63
Many courts had already had the opportunity to examine and define the
phrase “principal place of business” in interpreting the Bankruptcy Act, which
contains that same language.64 Congress primarily relied upon the phrase’s
57. See 28 U.S.C. § 1332(c)(1); Moore & Weckstein, supra note 13, at 12 (noting amendment gave
legislative recognition to judicial doctrine).
58. See Moore & Weckstein, supra note 13, at 31-32 (correlating principal place of business with
domicile of natural person).
59. See supra notes 18-20 and accompanying text (acknowledging purpose of diversity jurisdiction as
means to prevent bias against out-of-state litigants).
60. See Moore & Weckstein, supra note 13, at 31 (proffering corporation’s presence in location often
triggers designation of principal place of business as same).
61. See Indus. Tectonics, Inc. v. Aero Alloy, 912 F.2d 1090, 1094 (1990) (reasoning local contact
alleviates prejudice and justifies consideration of corporation as citizen of subject state). Even though a
corporation may conduct substantial business in several different states, courts would regard it as a citizen of
the one state where its principal place of business is located. See S. REP. NO. 85-1830, at 4 (1958), reprinted in
1958 U.S.C.C.A.N. 3099, 3102.
62. See 28 U.S.C. § 1332 (c)(1) (2006); see also Moore & Weckstein, supra note 13, at 12 (outlining
details of 1958 amendment and possibility of dual citizenship for corporations). If a corporation has its
principal place of business outside its state of incorporation, the corporation will be a citizen of two states. See
Lindsey D. Saunders, Note, Determining a Corporation’s Principal Place of Business: A Uniform Approach to
Diversity Jurisdiction, 90 MINN. L. REV. 1475, 1477-78 (2006) (discussing practical effect of 1958 amendment,
including attempt to reserve access to federal courts).
63. See infra Part II.D (discussing role of courts in interpreting “principal place of business” to determine
corporate citizenship).
64. See 11 U.S.C. § 11(a)(1) (1957) (repealed 1978) (using “principal place of business” language in
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usage in bankruptcy law in its application to the 1958 amendment.65
Nevertheless, there appears to be nearly as many interpretations of “principal
place of business” as there are bankruptcy decisions.66 Even before the
amendment to § 1332, bankruptcy cases were conflicted as to whether the
principal place of business of a corporation was located at the executive offices
or among the various outposts of the corporation’s general business activities.67
Thus, along with this borrowed language came its functional ambiguities; the
phrase “principal place of business” would continue to plague interpretations of
§ 1332 for decades to come.68
The 1958 version of § 1332 has itself been subject to various amendments
since its inception, the most recent being the Class Action Fairness Act of 2005
(CAFA).69 Contrary to previous amendments that have categorically restricted
access to federal courts via diversity jurisdiction, CAFA expands federal
diversity jurisdiction by removing traditional jurisdictional obstacles.70 CAFA
limits a plaintiff’s ability to litigate class action suits in state courts by setting
aside traditional principles of statutory diversity jurisdiction in favor of original
federal jurisdiction, thereby allowing removal of class actions based upon state
law that previously could only be filed in state courts.71
D. The Circuits in Disarray as to Application of Diversity Jurisdiction
Kelly v. United States Steel Corp.72 was one of the first cases in which a
circuit court attempted to interpret the meaning of “principal place of business”
context of bankruptcy law); Sabo v. Standard Oil Co. of Ind., 295 F.2d 893, 894 (7th Cir. 1961) (noting
procedural familiarity with principal place of business as aspect of bankruptcy law).
65. See S. REP. NO. 85-1830, at 4, 1958 U.S.C.C.A.N. at 3102. The Senate report stated that the notion of
basing a test of jurisdiction upon a corporation’s principal place of business was well-founded in the decisions
of the courts, as well as in federal statutes including the Bankruptcy Act. See 11 U.S.C. § 11(a)(1); S. REP. NO.
85-1830, at 4, 1958 U.S.C.C.A.N. at 3102. In addition to determining venue under the Bankruptcy Act,
principal place of business is also considered as a condition of venue in many statutes. See Securities Exchange
Act of 1934, ch. 404, § 25, 48 Stat. 881, 901 (1934) (current version at 15 U.S.C. § 78y(a)(1) (2006)).
66. See 1 COLLIER, BANKRUPTCY ¶ 2.19, at 202-03 (14th ed. 1939) (noting existence of varying
interpretations of “principal place of business” among bankruptcy decisions); Note, supra note 56, at 316-18.
67. See 1 COLLIER, BANKRUPTCY, supra note 66, ¶ 2.19, at 202-03 (detailing various interpretations of
“principal place of business” in bankruptcy cases); Moore & Weckstein, supra note 29, at 1438-45 (outlining
discrepancies in interpretation of “principal place of business”); see also Note, supra note 56, at 316-18
(illustrating application of principal place of business after 1958 amendment).
68. See infra Part II.D (outlining various interpretations of “principal place of business” language).
69. See generally WRIGHT ET AL., supra note 18, § 3601 (outlining amendments to § 1332).
70. See Coby Warren Logan, Note, Federal Class Action Reform Legislation: The “Unfair” Approach to
Addressing the Issues of Modern Mass Tort Litigation, 40 TORT TRIAL & INS. PRAC. L.J. 1145, 1146-47 (2005)
(explaining substance and effects of amendments to § 1332, specifically CAFA); Saunders, supra note 62, at
1486 (noting CAFA lessened adversity corporate defendants face regarding access to federal courts).
71. See Scott Nelson, A Section-by-Section Analysis of the Class Action Fairness Act of 2005, PUBLIC
CITIZEN LITIGATION GROUP, 2-3, http://www.citizen.org/documents/TheClass%20ActionFairnessAct.pdf (last
visited Nov. 22, 2010).
72. 284 F.2d 850 (3d Cir. 1960).
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in § 1332.73 In Kelly, the corporation’s board of directors both formulated their
policy decisions and held meetings in New York, but a separate committee
located in Pennsylvania made determinations regarding the operation of the
steel business.74 The Third Circuit created the “center of corporate activities
test,” choosing to define “principal place of business” based upon the location
of the business decisions and not the place of corporate policymaking.75 The
Third Circuit has been the only circuit to exclusively use the center of corporate
activities test when determining a corporation’s principal place of business.76
In Wisconsin Knife Works v. National Metal Crafters,77 the Seventh Circuit
adopted the “nerve center test” because it found that “although the state in
which a corporation has its headquarters is not always the state of the
corporation’s principal place of business . . . usually it is.”78 In 2008, when
deciding Illinois Bell Telephone Co. v. Global NAPs Illinois, Inc.,79 the Seventh
Circuit reiterated its adherence to the nerve center test.80 The Seventh Circuit
reasoned that basing citizenship on the corporation’s nerve center is as near a
bright—line rule as possible, and that it is beneficial to have citizenship be
easily determinable.81
While the Seventh Circuit adhered solely to the nerve center test, and the
Third Circuit chose to apply the corporate activities test, the “total activity test”
combines the two.82 After Wisconsin Knife Works and Kelly, the next major
decision regarding defining principal place of business came in J. A. Olson Co.
v. City of Winona,83 wherein the Fifth Circuit analyzed both the nerve center
test and the place of activity test adopted by other circuit courts to further
develop the total activity test.84 In this test, depending upon the nature of the
corporation, either the place of activities test or the nerve center test could be
73. See id. at 851 (indicating first instance of court investigating and assigning meaning to “principal
place of business”).
74. See id. at 853-54 (reciting facts of corporation in question in Kelly).
75. See id. at 854. The court noted that the concept of “principal place of business” is merely an artificial
distinction. See id. at 853 (emphasizing location of functional business decisions critical in determining
corporation’s principal place of business).
76. See Grand Union Supermarkets of V.I., Inc. v. H.E. Lockhart Mgmt., Inc., 316 F.3d 408, 410-11 (3d
Cir. 2003) (rejecting other circuits’ approaches to determine principal place of business).
77. 781 F.2d 1280 (7th Cir. 1986).
78. See id. at 1282; see also Scot Typewriter Co. v. Underwood Corp., 170 F. Supp. 862, 865 (S.D.N.Y.
1959) (originating nerve center test).
79. 551 F.3d 587 (7th Cir. 2008).
80. See id. at 590 (applying nerve center test exclusively).
81. See Wis. Knife Works, 781 F.2d at 1282 (opting for simpler nerve center test to ensure jurisdiction
remains easily determinable).
82. See J.A. Olson Co. v. City of Winona, 818 F.2d 401, 404 (5th Cir. 1987) (detailing aspects of total
activity test).
83. Id.
84. See id. at 411-13 (discussing various tests for jurisdiction). The Fifth Circuit originally adopted the
total activity test from Anniston Soil Pipe Co. v. Central Foundry Co., 216 F. Supp. 473 (N.D. Ala. 1963),
where the court emphasized the pervasiveness of the corporation’s production facilities over its executive
offices. See id. at 474-75 (considering all aspects of corporation in determining principal place of business).
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applied in determining citizenship; if the corporation’s operations are “farflung,” then the nerve center test should be applied; when the corporation has a
corporate headquarters in one state and its operations in another, then the place
of activity test should be utilized; and finally, when the daily activity of a
corporation is “passive” and the decision-making is conducted at the entity’s
headquarters, then the nerve center test should be exercised.85 Prior to Hertz,
the majority of the circuits applied the total activity test, with the First, Second,
Fourth, Fifth, Sixth, Eighth, Tenth, and Eleventh Circuits each weighing the
factors discussed in Olson as part of their scheme for ordaining a corporation’s
citizenship.86
Further complicating the matter, different circuits had varying names for the
same countervailing interests considered in the total activity test, including the
“center of corporate activities” in Kelly, the “place of activities” from Olson,
and the Fourth Circuit’s “home office” analysis.87 In addition, the Southern
District of New York recognized the effect of the corporation’s impact on the
public as part of its total activity test.88 In R.G. Barry Corp. v. Mushroom
Makers, Inc.,89 the defendant corporation had its policymaking, administrative,
and manufacturing operations in Mississippi, but the court concluded that
because Mushroom Makers had its most extensive contact with the public in
New York, New York was the jurisdiction where it was least likely to suffer
from “local prejudice,” and therefore deemed Mushroom a citizen of New York
85. See J.A. Olson Co., 818 F.2d at 404 (declaring total activity test to include nerve center and place of
activity tests).
86. See generally Badian v. Elliott, 165 F. App’x 886 (2d Cir. 2006) (holding for principal place of
business, courts focus on contacts with the public); Shell Rocky Mountain Prod., LLC v. Ultra Res., Inc., 415
F.3d 1158 (10th Cir. 2005) (applying total activity test to determine principal place of business); Capitol Indem.
Corp. v. Russellville Steel Co., 367 F.3d 831 (8th Cir. 2004) (upholding total activity test); Gafford v. Gen.
Elec. Co., 997 F.2d 150 (6th Cir. 1993) (relying on total activity test to determine principal place of business);
Harris v. Black Clawson Co., 961 F.2d 547 (5th Cir. 1992) (identifying total activity test as controlling test for
Fifth Circuit); Topp v. CompAir Inc., 814 F.2d 830 (1st Cir. 1987) (declaring total activity test as determinative
for principal place of business); Vill. Fair Shopping Ctr. Co. v. Sam Broadhead Trust, 588 F.2d 431 (5th Cir.
1979) (establishing total activity test as method to decide principal place of business); Caperton v. Beatrice
Pocahontas Coal Co., 585 F.2d 683 (4th Cir. 1978) (outlining and applying aspects of total activity test); Riggs
v. Island Creek Coal Co., 542 F.2d 339 (6th Cir. 1976) (explaining Sixth Circuit’s application of total activity
test); United Nuclear Corp. v. Moki Oil & Rare Metals Co., 364 F.2d 568 (10th Cir. 1966) (discussing use of
total activity test to establish principal place of business); Egan v. Am. Airlines, Inc., 324 F.2d 565 (2d Cir.
1963) (relying on total activity test to ascertain principal place of business).
87. See generally J.A. Olson Co., 818 F.2d 401 (considering place of activities in context of total activity
test); Caperton, 585 F.2d 683 (investigating corporation’s home office under total activity test); Kelly v. U.S.
Steel Corp., 284 F.2d 850 (3d Cir. 1960) (employing center of corporate activities as aspect of total activity
test).
88. See R.G. Barry Corp. v. Mushroom Makers, Inc., 612 F.2d 651, 656-57 (2d Cir. 1979) (holding
corporation New York citizen despite considerable activity in other states); see also Frisone v. Pepsico, Inc.,
369 F. Supp. 2d 464, 470 (S.D.N.Y. 2005) (noting Second Circuit’s recognition of public impact from R.G.
Barry Corp. in determining citizenship).
89. 612 F.2d 651 (2d Cir. 1979).
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for diversity purposes.90
The Ninth Circuit did not use the place of activities test or the nerve center
test or a combination of the two to ascertain corporate citizenship, but instead
formulated and applied its own test: the “place of operations test.”91 In 1987,
in Co-Efficient Energy Systems v. CSL Industries, Inc.,92 the Ninth Circuit cited
a Southern District of New York case, Inland Rubber Corp. v. Triple A Tire
Service, Inc.93 and adopted the notion that a corporation’s place of operations is
where a “substantial predominance” of the corporate activities take place.94
The Ninth Circuit acknowledged the validity of the nerve center test, but only
in instances where no single state contained a substantial majority of the
corporation’s day-to-day activities.95 The Ninth Circuit has heard many of the
recent cases interpreting the meaning of § 1332, including cases in 2001, 2002,
2003, 2008, and most recently, the Hertz matter in 2009.96
The difficulties presented by the four-way circuit split are elucidated by
example: imagine that HypoCorp is a corporation that makes snow globes
featuring the Statue of Liberty. HypoCorp is incorporated in Massachusetts
with its corporate headquarters in Illinois. It owns a factory in Pennsylvania
where its daily decision-making occurs, and it has wholesale locations in
Colorado, Iowa, Texas, and California, with the California locations
outnumbering the rest. Furthermore, HypoCorp’s goods are sold almost
exclusively to souvenir shops in New York City in the Southern District of
New York. Depending upon the location where a suit is brought against
90. See id. at 656 (proclaiming corporation citizen of New York based upon extensive corporate contact
with same).
91. See infra note 96 (listing Ninth Circuit cases applying place of operations test).
92. 812 F.2d 556 (9th Cir 1987).
93. 220 F. Supp. 490 (S.D.N.Y. 1963).
94. See Co-Efficient Energy Sys., 812 F.2d at 558 (rejecting diversity jurisdiction if corporation runs
business only in one state); see also Inland Rubber Corp., 220 F. Supp. at 494-96 (declaring corporations
conducting business in several states likely remain diverse from some of those states). The Ninth Circuit cited
Inland Rubber Corp. even though the Third Circuit currently uses the total activity test. See Co-Efficient
Energy Sys., 812 F.2d at 558-59 (acknowledging place of operations test promulgated in Inland Rubber Corp.).
Interestingly, the Southern District of New York is also the same jurisdiction that, prior to Hertz, began crafting
the public impact test. See Frisone v. Pepsico, Inc., 369 F. Supp. 2d 464, 471-72 (S.D.N.Y. 2005) (noting
“public impact” test considers degree of corporation’s contact with general population).
95. See Indus. Tectonics, Inc. v. Aero Alloy, 912 F.2d 1090, 1094 (9th Cir. 1990) (outlining proper
application of nerve center test). The court maintained that the nerve center test should only be utilized when
no single state contains a majority of the corporation’s business activity. See id.
96. See generally Davis v. HSBC Bank Nev., N.A., 557 F.3d 1026 (9th Cir. 2009) (discussing principal
place of business of national retail chain); Friend v. Hertz Corp., 297 F. App’x 690 (9th Cir. 2008), vacated and
remanded, 130 S. Ct. 1181 (2010); Cook v. AVI Casino Enters., Inc., 548 F.3d 718 (9th Cir. 2008) (debating
principal place of business of car rental corporation); Redding v. Hitachi Am., Ltd., 69 F. App’x 887 (9th Cir.
2003) (considering principal place of business of recently relocated corporation); United Computer Sys., Inc. v.
AT&T Corp., 298 F.3d 756 (9th Cir. 2002) (applying two-part inquiry to determine principal place of
business); Rosenblatt v. Ernst & Young Int’l, Ltd., 28 F. App’x 731 (9th Cir. 2002) (determining principal
place of business of international corporation); Tosco Corp. v. Cmtys. for a Better Env’t, 236 F.3d 495 (9th Cir.
2001) (considering principal place of business of corporate plaintiff).
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HypoCorp, it could be a citizen of at least five different states.97 For instance,
HypoCorp would always be a citizen of Massachusetts, its state of
incorporation.98 If sued in the Seventh Circuit, which uses the nerve center test,
HypoCorp’s principal place of business would be Illinois, the location of its
corporate headquarters.99 If HypoCorp is sued in the Third Circuit, which uses
the location of business decisions test, its principal place of business would be
Pennsylvania, the location of the factory where the day-to-day decisions are
made.100 In a total activity circuit, a court would likely find that the nerve
center test would apply because HypoCorp’s operations are so far-flung;
however, because HypoCorp maintains wholesalers in Colorado, Texas,
California, and Iowa, the same court might also identify a place of operations in
any one of those states.101 If HypoCorp was sued in the Ninth Circuit, which
utilizes the predominance of activity test, HypoCorp’s principal place of
business would likely be in California because its California wholesalers
outnumber those in all other states.102 Finally, if HypoCorp faced suit in the
Southern District of New York, it could potentially be deemed a citizen of New
York because that is the district where HypoCorp engages in its most extensive
contact with the public.103
The potential for multistate corporations to be deemed citizens of more than
two states for the purposes of diversity is clearly in conflict with the
congressional intent of § 1332, which states that corporations are citizens of
two states—the corporation’s state of incorporation and the state of its principal
place of business.104 Furthermore, the myriad of complicated balancing tests
with numerous different features and names set the stage for the Supreme
Court, in Hertz Corp. v. Friend, to establish a uniform test to determine a
corporation’s principal place of business under § 1332.105
97. See infra notes 98-103 and accompanying text (applying various circuits’ tests for determining
corporate citizenship to hypothetical example).
98. See 28 U.S.C. § 1332(c)(1) (2006). “[A] corporation shall be deemed to be a citizen of any State by
which it has been incorporated . . . .” Id.
99. See Wis. Knife Works v. Nat’l Metal Crafters, 781 F.2d 1280, 1282 (7th. Cir 1986) (noting location of
corporate headquarters generally fulfills nerve center test for diversity purposes).
100. See Kelly v. U.S. Steel Corp., 284 F.2d 850, 854 (3d Cir. 1960) (maintaining center of corporate
activity determines principal place of business).
101. See J.A. Olson Co. v. City of Winona, 818 F.2d 401, 404 (5th Cir. 1987) (applying total activity test
due to corporation’s far flung operations).
102. See Davis v. HSBC Bank Nev., N.A., 557 F.3d 1026, 1026 (9th Cir. 2009) (declaring predominance
of activity test appropriate in scenarios involving corporate business in multiple states).
103. See Frisone v. Pepsico, Inc., 369 F. Supp. 2d 464, 470 (S.D.N.Y. 2005) (applying public impact test to
determine corporate citizenship); see also R.G. Barry Corp. v. Mushroom Makers, Inc., 612 F.2d 651, 656 (2d
Cir. 1979) (finding extensive public contact sufficient to alleviate fears of judicial prejudice).
104. See 28 U.S.C. § 1332(c)(1) (2006) (asserting corporation both citizen of state of incorporation and
state containing principal place of business).
105. See Hertz Corp. v. Friend, 130 S. Ct. 1181, 1192 (2010) (holding nerve center only applicable test to
determine corporate citizenship).
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E. Hertz Corp. v. Friend
In Hertz, two California citizens brought suit in state court alleging violation
of California employment law.106 Hertz subsequently removed the case to
federal court on the grounds that the parties were diverse, contending that its
principal place of business was in Delaware or New Jersey, not California.107
The Northern District of California, in applying the Ninth Circuit’s place of
operations test, ruled against Hertz in holding that Hertz’s principal place of
business was in California, and remanded the case to the state court.108 The
Court of Appeals for the Ninth Circuit affirmed the decision, and the Supreme
Court subsequently granted Hertz’s petition for writ of certiorari.109
Justice Breyer, writing for a unanimous Court, vacated the remand order and
held that a corporation’s principal place of business “is best read as referring to
the place where a corporation’s officers direct, control, and coordinate the
corporation’s activities.”110 The Court opined that the plain language of § 1332
called for a test that focuses on a single location within a state, rather than the
aggregation of the corporation’s statewide business, and the nerve center test
most closely fit this criteria.111 In simplifying the test to determine corporate
citizenship, the Court also articulated that administrative ease is a major virtue
in terms of both financial and judicial resources, as is establishing predictability
concerning jurisdiction for all parties in litigation.112
III. ANALYSIS
The Court’s decision in Hertz seems to err on the side of administrative
106. See id. at 1186 (reciting facts of case).
107. See Brief for Petitioner at 6, Hertz, 130 S. Ct. 1181 (No. 08-1107). Hertz also noted that it conducted
business operations in forty-four states, and earned less than twenty percent of its revenue in California. See
Seamus C. Duffy & Michael P. Daly, Corporate Citizenship Simplified: The Hertz Corp. v. Friend, DRINKER
BIDDLE (Feb. 25, 2010), http://www.drinkerbiddle.com/publications/Detail.aspx?pub=2062&servicesearch=0
(noting national distribution of Hertz’s revenue).
108. See Hertz, 130 S. Ct. at 1186 (considering aspects of Hertz’s business and management). The Court
noted that Hertz conducted a “significantly larger” amount of business in California than in any other state. See
id.
109. See Friend v. Hertz Corp., 297 F. App’x 690, 691 (9th Cir. 2008) (affirming district court’s decision
regarding corporate citizenship), vacated and remanded, 130 S. Ct. 1181 (2010).
110. See Hertz, 130 S. Ct. at 1192 (declaring definitive definition of nerve center).
111. See Hertz Corp. v. Friend, 130 S. Ct. 1181, 1192 (2010) (setting forth nerve center test as standard for
determining principal place of business). The Court noted that the corporation’s nerve center will normally be
the location of its headquarters, provided that the headquarters are the actual center of direction, control, and
coordination, and not merely an office where board meetings are held. See id.
112. See id. at 1193-94 (discussing administrative concerns surrounding subject matter jurisdiction in
diversity cases). Complex jurisdictional tests tax resources not only by increasing actual litigation time, but
also by resulting in appeals and reversals. See id. (detailing various litigation costs); see also Marcia Coyle,
Location of Headquarters Defines Jurisdiction for Corporations: High Court, LEGAL INTELLIGENCER, Feb. 24,
2010, available at 2010 WLNR 3870926 (noting Court relied upon simplicity and practicality in choosing
nerve center test).
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simplicity—but at what cost?113 This decision may frustrate the original
purpose of diversity jurisdiction, and also has the potential to disadvantage
plaintiffs in corporate diversity suits.114 Moreover, there are several factors that
foreshadow that the Hertz decision will actually increase the costs of litigation,
which is contrary to one of the primary motivating factors for its outcome.115
Nevertheless, such a bright-line rule, as set forth in Hertz, eliminates any
incongruities among the circuits.116 Corporations and citizens alike can now
approach litigation with a clear expectation of the jurisdictional aspects of any
dispute.117 No longer will a corporation’s state citizenship for purposes of
diversity jurisdiction vary by virtue of the federal district in which the suit is
brought.118 Likewise, private citizens, as potential parties to a suit, will now be
able to more accurately gauge the likelihood of the suit’s removal to federal
court and tailor their strategies accordingly, which demonstrates that there is
indeed much benefit to be derived from administrative ease.119
The Court’s careful deconstruction of the language of § 1332 is simple and
direct.120 This has even prompted discussion as to why no lower court has ever
employed such a deliberate analysis.121 In writing for the unanimous Court,
113. See Coyle, supra note 112 (asserting Court weighed values of practicality and simplicity more heavily
than legislative history).
114. See supra notes 18-20 and accompanying text (discussing constitutional concerns surrounding aspects
of diversity jurisdiction); see also infra notes 157-161 and accompanying text (revealing surprising results in
favor of defendants in removed cases).
115. See infra note 156 and accompanying text (considering consumption of financial resources relative to
diversity litigation); see also infra notes 154-155 and accompanying text (discussing judicial resources and
application of Erie Doctrine).
116. See Hertz, 130 S. Ct. at 1192-93 (setting forth uniform rule for determining corporate citizenship for
diversity purposes). Resolving the circuit split will undoubtedly leave little question as to the citizenship of a
corporation for diversity purposes. See id. (providing clarity in determining corporation’s principal place of
business). Corporations also remain citizens of their state of incorporation. See 28 U.S.C. § 1332(c)(1) (2006).
117. See Dori Kornfeld Goldman, Decision Should Streamline Removal Litigation, TEX. LAW., Apr. 19,
2010, available at 2010 WLNR 8062485 (noting Hertz decision should simplify litigation in diversity disputes
over forum conflicts).
118. See supra notes 98-103 and accompanying text (illustrating differing results in citizenship
determination relative to parameters of applied citizenship test).
119. See Saunders, supra note 62, at 1486-88 (discussing forum shopping aspects and effect of
administrative efficiency precipitated by uniform federal rules).
120. See Hertz Corp. v. Friend, 130 S. Ct. 1181, 1192-93 (2010) (considering language of § 1332 to
determine principal place of business).
121. See id. (interpreting statutory language in plain and meticulous manner). The Court declined to
consider an aggregation of a corporation’s statewide business for purposes of determining citizenship, opining
that the plain wording of the statute was evidence of Congress’s intent to focus on a single location. See id.
Nevertheless, courts have held that under the place of operations test, a corporation’s principal place of
business is the state containing a “substantial predominance” of its operations. See Davis v. HSBC Bank Nev.
N.A., 557 F.3d 1026, 1028-29 (9th Cir. 2009) (applying place of operations test to determine principal place of
business). Furthermore, in Inland Rubber Corp., the court asserted that the legislative history of § 1332
suggests that emphasis should be placed upon the “locus of the operations” of the corporation, and read
principal place of business to mean the state that contains a substantial predominance of corporate operations—
a holding directly at odds with the plain meaning interpretation of § 1332 the Hertz Court used. See Inland
Rubber Corp. v. Triple A Tire Serv., Inc., 220 F. Supp. 490, 496 (S.D.N.Y. 1963) (developing place of
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Justice Breyer correctly asserts that the word “place” in the phrase “principal
place of business” is in the singular.122 Furthermore, the Court declared that
the word “principal” points to the one specific location that is the center of a
corporation’s business activities and not a collection of localities within a
state.123 Taken as a whole, it seems clear that the plain language of the statute
requires consideration of the single most prominent place of business activity,
and that the corporation is a citizen only of the state that hosts this locality.124
Moreover, when viewed in this light, it becomes evident that any approach that
considers the aggregate of multiple locations or “places” within a state to
determine a corporation’s principal place of business reaches beyond the
statute’s scope as intended by Congress.125
While the nerve center test set out in Hertz is simple to apply and provides
consistent results, it seems a stretch to contend that the general public typically
considers the nerve center to be a corporation’s main place of business.126 It is
difficult to imagine that a substantial portion of the consumer population would
consider Wal-Mart as principally doing business in Arkansas—the location of
its corporate offices—as opposed to its neighborhood retail location.127 Indeed,
many large corporations actively invest in assimilating their brand within
individual communities.128 These corporations go to great lengths to be
operations test to determine principal place of business).
122. See Hertz, 130 S. Ct. at 1192-93 (deconstructing language of § 1332).
123. See id. at 1192 (noting § 1332’s use of “principal” requires identification of single, “main,
prominent,” or “leading” place of business).
124. See id. at 1186 (declaring nerve center most prominent place of business activity). The Court
determined that because the word “place” follows the words “State where,” that the “place” is a location within
a state, and therefore not the state itself. See id. at 1192-93.
125. See id. at 1193 (holding aggregation of statewide business inconsistent with congressional intent).
126. See Hertz Corp. v. Friend, 130 S. Ct. 1181, 1193 (2010) (contending public commonly associates
corporation’s main presence with corporate offices). Curiously, the Court also commented that the location of
a corporation’s office may “bear no more than a distant relation to the likelihood of prejudice.” See id.
127. See Lisa Scherzer, Wal-Mart Hits a Wall, SMARTMONEY, Sept. 28, 2006, http://www.smart
money.com/investing/economy/wal-mart-hits-a-wall-20149/#ixzz0jIOZcu5N (discussing immersion of large
corporations in American communities and consequences of same).
Sixty-two percent of Americans live within five miles of a Wal-Mart—less than a 10-minute car
ride. . . . 94% of Americans live within 15 miles of a Wal-Mart. So virtually anyone except the
residents of Manhattan who want to shop at a Wal-Mart—if you build one in Times Square, 70% of
Americans would be five miles from one—can shop at Wal-Mart.
Id. (illustrating cultural pervasiveness of some large corporations). While some corporations are considered
“local” simply due to the ubiquitous nature of their real estate holdings, many others entrench themselves even
further by actively engaging with the public via charitable community work. See infra note 129 (articulating
examples of community programs of some large corporations).
128. See Ann Zimmerman & Rachel Dodes, Grim Results Drive Retail Strategies, WALL ST. J., Feb. 25,
2009, http://online.wsj.com/article/SB123552149054864707.html (detailing implementation of localization
strategy). Reacting to less than ideal fiscal results, many major corporations have taken steps to assimilate
themselves into local communities in hopes of increasing profits. See id.; see also Constance L. Hays,
Economy & Business; Retailers Seek to Lure Customers With Service, N.Y. TIMES, Dec. 1, 2003,
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perceived as “citizens” of the communities where they operate, and they should
not enjoy liberal access to the federal courts for fear of bias when disputes
arise.129 Moreover, this line of reasoning behind the implementation of the
nerve center test seems defective when considered in light of the framers’ intent
in creating diversity jurisdiction.130 Where the general public assumes a
corporation’s main place of business is located is not by itself any indication of
bias and thus should be a nonfactor; what ultimately matters is preventing bias
within the courts.131 The Supreme Court seems to have ignored the possibility
that § 1332 has evolved to the point where its application is no longer
consistent with the spirit of the diversity jurisdiction provision in the
Constitution.132 This decision seems wholly concerned with the administrative
quagmire that has resulted from the Court’s failure to resolve the issue and
remains indifferent to the equitable considerations surrounding diverse or
potentially diverse parties.133
http://www.nytimes.com/2003/12/01/technology/economy-business-retailers-seeking-to-lure-customers-withservice.html?pagewanted=1 (showing localization and personalization efforts of corporations traditional
strategies, not merely reactions to recession).
129. See Indus. Tectonics, Inc. v. Aero Alloy, 912 F.2d 1090, 1094 (9th Cir. 1990) (identifying in-state
activities leading to possible state citizenship). Specifically, the court noted that employment of personnel,
purchasing of materials, and sales of goods and services can increase local familiarity with the corporation and
reduce problems with native prejudice against outsiders. See id.; see also Community Giving, TARGET CORP.,
http://pressroom.target.com/pr/news/community-giving.aspx (last visited Nov. 25, 2010) (exemplifying
corporate outreach programs impacting general public). Since 1946, Target has given five percent of its
income to “support and enrich” the communities where it conducts business. Community Giving, supra.
Furthermore, corporations often openly assert themselves as integral members of the communities they serve.
See id.; see also Philanthropy, AT&T, http://www.att.com/gen/corporate-citizenship?pid=7737 (last visited
Nov. 25, 2010). AT&T openly supports community projects in an attempt to create opportunities and address
the needs of the neighborhoods where its employees and customers live and work. See Philanthropy, supra;
see also Walmart Store and Sam’s Club Giving Programs, WALMART CORPORATE, http://walmartstores.com/
communitygiving/238.aspx?p=8979 (last visited Nov. 25, 2010). The Walmart Foundation supports charitable
organizations that it considers important to its customers and associates in their own neighborhoods. See
Walmart Store and Sam’s Club Giving Programs, supra. Wal-Mart’s founder, Sam Walton, introduced the
philosophy “operate globally, give back locally.” Id.
130. See supra notes 18-20 and accompanying text (explaining preventing bias against out-of-staters main
reasoning behind diversity jurisdiction). Given the pervasiveness of many large corporations and their efforts
to localize, the nerve center test may unjustifiably allow corporate defendants access to federal courts when
there is no legitimate fear of bias on the state level. See supra note 129 (detailing corporations’ efforts to
“localize” and establish themselves as community members); see also supra note 127 (illustrating extreme
cases of corporations ingraining themselves in multiple communities).
131. See supra note 18 and accompanying text (detailing motivation behind constitutional diversity
provision).
132. Compare Burford v. Sun Oil Co., 319 U.S. 315, 336 (1943) (Frankfurter, J., dissenting) (asserting
prevention of bias against out-of-staters sole reason behind diversity jurisdiction), with Hertz Corp. v. Friend,
130 S. Ct. 1181, 1193 (2010) (emphasizing administrative concerns as paramount in deciding to adopt nerve
center test). The Hertz Court favored the need for simple judicial administration of a jurisdictional statute, and
seems to have given little consideration to the prevention of actual bias or abuse of diversity jurisdiction. See
Hertz, 130 S. Ct. at 1186 (emphasizing importance of administrative ease while forgoing mention of protection
against bias).
133. See supra notes 112-113 and accompanying text (arguing procedural and administrative concerns
substantial motivating factors for Court’s decision); see also S. REP. NO. 85-1830, at 3-4 (1958), reprinted in
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The Hertz decision may well be at odds with the legislative intent behind the
1958 amendment to § 1332, the very language that the Court so heavily relied
upon in the opinion.134 The Senate report accompanying the amendment
commented:
This fiction of stamping a corporation a citizen of the state of its incorporation
has given rise to the evil whereby a local institution, engaged in a local
business and in many cases locally owned, is enabled to bring its litigation into
the federal courts simply because it has obtained a corporate charter from
135
another state.
Changing “has obtained a corporate charter from another state” to read “has
established its corporate offices in another state,” pursuant to the new rule in
Hertz, would render the exact same “evil” whereby an essentially local
institution can bypass the state court and access the federal system.136
Because defending a case in a state court outside the litigant’s home state
potentially exposed the out-of-state party to prejudice or bias, the Constitution
allowed controversies between diverse citizens to be decided in the federal
courts.137 Many corporations, however, consider the federal courts more
sympathetic to their interests and consequently will remove their matters to
federal court if given the opportunity.138 Nevertheless, when a corporation has
a pervasive presence in a state, such as Wal-Mart does in Massachusetts, little
need for protection against bias exists because potential Massachusetts jurors
are familiar with Wal-Mart as an employer, retailer, and fixture of their daily
lives.139 The Court acknowledged that such discrepancies will arise, but
maintained that they must be accepted in favor of establishing a clearer rule.140
1958 U.S.C.C.A.N 3099, 3101-02 (declaring corporation citizen of state of incorporation and state of principal
place of business).
134. See Hertz, 130 S. Ct. at 1192-93 (interpreting statutory language of § 1332); see also 28 U.S.C. §
1332 (2006); S. REP. NO. 85-1830, at 3-4, 1958 U.S.C.C.A.N at 3101-02 (discussing legislative intent of
amendment).
135. See S. REP. NO. 85-1830, at 3-4, 1958 U.S.C.C.A.N at 3101-02 (declaring citizenship determined by
state of incorporation ineffective in combating unfair bias).
136. See id. (illustrating flaw in defining citizenship by state of incorporation); see also Hertz, 130 S. Ct. at
1193-94 (asserting nerve center corporate headquarters for citizenship purposes); supra note 52 and
accompanying text (describing corporation’s manipulation of jurisdiction by reincorporating in another state,
thereby creating diversity).
137. See supra notes 18-20 (setting forth motivation for constitutional provision of diversity jurisdiction).
138. See Adam N. Steinman, What is the Erie Doctrine? (And What Does it Mean for the Contemporary
Politics of Judicial Federalism?), 84 NOTRE DAME L. REV. 245, 245 (2008) (explaining why corporate
defendants prefer litigating in federal court); see also Goldman, supra note 117, (noting corporate defendants
enjoy unanimous verdict requirement, stricter pleading requirements, single judge oversight in federal courts).
139. See supra note 127 (illustrating certain corporations’ close association and interaction with daily life
of large percentages of population).
140. See Hertz Corp v. Friend, 130 S. Ct. 1181, 1195 (2010) (acknowledging shortcomings of nerve center
test); see also Robert E. Bartkus, Corporate Citizenship: Supreme Court Designates A Single Test, LEGAL
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This seems entirely inconsistent with the constitutional provision for diversity
jurisdiction, which makes no statement in regard to administrative ease; rather,
it focuses on maintaining fair and unbiased litigation.141 Keeping this original
reasoning for diversity jurisdiction in mind, the nerve center test is possibly the
method that yields citizenship results most in conflict with the constitutional
purpose, because it seems unlikely that a corporation would experience bias in
every jurisdiction besides that of its principal place of business—its nerve
center—due to the nationwide stature of many large corporations.142
Therefore, what essentially results from application of the Hertz decision is
an increase in cases removed to the federal courts that have nothing to do with
a bias toward out-of-staters, which was the original motivation for the
constitutional provision for diversity jurisdiction.143 This increase in caseload
for federal courts thereby serves to escalate the occurrence of federal courts
applying the Erie Doctrine to decide matters of state law; what is saved on the
front-end in terms of efficiency, administrative ease, and judicial resources,
will likely be lost to a greater degree on the back-end due to inconsistent
federal interpretation of state law.144
Corporate litigants generally prefer litigating in federal courts, which are
perceived as favorable to corporate defendants because of their pro-defendant
approaches to certain procedural issues.145 As such, the ruling in Hertz will
ostensibly increase the number of diversity cases that come before the federal
courts because corporations are likely to maintain their principal place of
business—that is, their corporate headquarters—in a different state from the
bulk of their employees and consumers, who are the most probable parties to a
suit against the corporation.146 It is likely that a large corporation will have a
significantly pervasive presence within individual communities as to be
INTELLIGENCER, Apr. 9, 2010, available at 2010 WLNR 7374222 (summarizing nerve center test as neither
automatic nor perfect).
141. See U.S. CONST. art. III, § 2; see also Friendly, supra note 11, at 484-90 (discussing motivation
behind diversity jurisdiction).
142. See Hertz, 130 S. Ct. at 1195 (applying nerve center test). The nerve center test focuses on the
corporate headquarters in determining a corporation’s citizenship. See id. It seems unlikely that the public
identifies large corporations more closely with their corporate offices as opposed to their publicly accessible
portals; accordingly, for purposes of bias prevention, the locality of a corporation’s nerve center should not be a
primary concern. See supra notes 127-129 and accompanying text (detailing corporate entrenchment as
community members and employers).
143. See supra note 18 and accompanying text (detailing historical reasoning for origination of diversity
jurisdiction).
144. See infra notes 154-158 (illustrating removed cases present difficulties and increase costs in
litigation).
145. See Steinman, supra note 138, at 245 (discussing corporate preference for litigating in federal courts);
Goldman, supra note 117 (acknowledging corporate defendants’ partiality to federal courts and their
advantages).
146. See Hertz Corp. v. Friend, 130 S. Ct. 1181, 1192-93 (2010) (setting forth nerve center test to
determine principal place of business). By definition, corporations whose business practices are geographically
dispersed will be diverse from the majority of their customers and employees.
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considered “local” themselves, notwithstanding the remote locality of the
corporation’s executive offices.147 It is entirely feasible that a corporation
could locate or relocate its corporate headquarters in the state it deems least
disposed to give rise to a dispute, thereby facilitating removal of most suits
against the corporation.148 In Black & White Taxicab & Transfer Co. v. Brown
& Yellow Taxicab & Transfer Co.,149 Brown & Yellow reincorporated in one
state and wholly operated in another state with the explicit intent to create
diversity in an ongoing dispute and to take advantage of the pre-Erie general
federal common law, which was different from state law.150 Post Hertz, it is
feasible, or even likely, that corporate litigants who favor the federal courts
could resume this practice, intent on taking advantage of diversity jurisdiction
simply by strategically locating their corporate headquarters.151
What is possibly even more disconcerting regarding the impact of Hertz is
the fact that while corporations enjoy the benefits of their increased
removability, plaintiffs suing corporate entities will be simultaneously
disadvantaged as a result of being forced into federal court.152 When diversity
is invoked, the federal court necessarily lacks original jurisdiction.153
Accordingly, in hearing cases based on diversity jurisdiction, the federal courts
must utilize the Erie Doctrine to determine and apply the appropriate state law
and, on occasion, this requires that federal judges prospectively resolve matters
of state law.154 The process of applying the Erie Doctrine can be confusing for
147. See supra note 127 and accompanying text (detailing varying degrees of corporate pervasiveness
across the nation); see also supra notes 128-129 and accompanying text (noting efforts of corporations to
localize their corporate images within communities).
148. See Black & White Taxicab & Transfer Co. v. Brown & Yellow Taxicab & Transfer Co., 276 U.S.
518, 523-24 (1928) (exemplifying manipulation of diversity jurisdiction benefitting corporations); see also
Duffy & Daly, supra note 107, at 1 (urging corporate clients to consider location of headquarters in light of
Hertz and its implications).
149. 276 U.S. 518 (1928).
150. See id. at 523-24 (outlining reasons for reincorporation relating to obtaining possibly more favorable
judicial outcome).
151. See Duffy & Daly, supra note 107, at 1 (discussing prospective strategy in advising corporate clients
as to location of nerve center).
152. See infra notes 157-161 and accompanying text (detailing win rate statistics for plaintiffs in removed
cases).
153. See U.S. CONST. art. III, § 2; see also Friendly, supra note 11, at 484-90 (detailing origins of diversity
jurisdiction).
154. See Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78-79 (1938) (elucidating choice of law in diversity
cases). The federal courts must apply state law in the same manner as the state courts. See id. Nevertheless,
on occasion, cases based on diversity present a question of first impression, requiring federal judges to
prospectively interpret and essentially create state law. See id. at 71. Such decisions coming from the federal
courts are not binding on the state courts, and therefore the issue can be relitigated in other cases, resulting in
an unnecessary waste of judicial resources. See id.; see also Hertz Corp. v. Friend, 130 S. Ct. 1181, 1193
(2010) (noting judicial resources at issue with result of Hertz decision). The Hertz Court commented on the
weight borne by the judicial system due to the necessary obligation of the courts to determine whether subject
matter jurisdiction exists in all cases, even when no party challenges it. See Hertz, 130 S. Ct. at 1193.
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litigants, juries, and often the courts themselves.155 The increased procedural
time and heightened complexity of the issues will dramatically amplify the
costs of litigation for a plaintiff.156
In addition to making litigation more expensive for a plaintiff, removal to
federal court decreases a plaintiff’s chances of prevailing in a suit as opposed to
litigation in state court.157 A study that investigated the win percentages of
federal cases shows that the overall win rate for plaintiffs in federal civil cases
is 57.97%, while in matters that have been removed, the win rate for plaintiffs
is only 36.77%.158 Even more dramatically, the win rate for plaintiffs in
original diversity cases is 71%, but only 34% in removed cases.159 Though the
precise reasons for this drop in success rates are unclear, it is likely due to the
federal courts being more amenable to defendants who remove their cases, and
such results may also be augmented by the removal itself; by defeating the
plaintiffs’ forum advantage, defendants may shift the biases, inconveniences,
and procedural law in their own favor.160 It would seem that a defendant’s
ability to choose the forum greatly augments his or her chances of success.161
Administrative ease is certainly a virtue and strict adherence to the nerve
center test undoubtedly will make it easier for courts and prospective parties to
determine jurisdiction.162 At the same time, the Hertz rule may result in a
heavier burden on the already overwhelmed federal dockets by permitting a
greater number of matters to be classified as diversity cases.163 Repeated
application of the Erie Doctrine and its associated guesswork and misgivings
will further encumber the legal system.164 Hertz will allow corporate
155. See John B. Corr, Thoughts on the Vitality of Erie, 41 AM. U. L. REV. 1087, 1098-99 (1992) (detailing
uncertainty of federal courts in applying ambiguous state law pursuant to dictates of Erie).
156. See EMERY G. LEE III & THOMAS E. WILLGING, FED. JUDICIAL CTR., LITIGATION COSTS IN CIVIL
CASES: MULTIVARIATE ANALYSIS, REPORT TO THE JUDICIAL CONFERENCE ADVISORY COMMITTEE ON
CIVIL RULES 5-6 (2010), http://www.fjc.gov/public/pdf.nsf/lookup/costciv1.pdf/$file/costciv1.pdf (analyzing
litigation costs relative to various factors). For every 1% increase in the duration of a case, it becomes .32%
more expensive to litigate. See id. (providing various statistics relative to litigation costs).
157. See Kevin M. Clermont & Theodore Eisenberg, Do Case Outcomes Really Reveal Anything About the
Legal System? Win Rates and Removal Jurisdiction, 83 CORNELL L. REV. 581, 584, 593 (1998) (highlighting
decline in plaintiff’s win rate correlates with removal of plaintiff’s case).
158. See id. at 593 (offering detailed analysis of decline in plaintiff’s win rate in removed matters).
159. See id. at 593-94 (comparing win rates of cases of original jurisdiction and of diversity jurisdiction in
federal courts). The effect upon plaintiff’s win rate after removal is not limited to cases involving diversity
jurisdiction. See id. at 593, 595. For example, federal question cases show a similar drop in plaintiff’s win rate
from 52% to 25%. See id. (displaying win-rate reduction for plaintiffs in all types removed cases).
160. See id. at 581 (proffering reasons for decline in plaintiff’s win rate in removed cases).
161. See Clermont & Eisenberg, supra note 157, at 593 (arguing forum provides important tactical
advantages to parties).
162. See Hertz Corp. v. Friend, 130 S. Ct. 1181, 1193 (2010) (maintaining simple jurisdictional rules offer
predictability of results and confidence of authority to hear cases).
163. See Steinman, supra note 138, at 245 (noting corporate defendants’ preference to litigate in federal
court). CAFA has already expanded access to the federal courts via diversity jurisdiction. See id.
164. See Corr, supra note 155, at 1098 (discussing difficulties in operation of Erie Doctrine). Application
of the Erie Doctrine is both a time-consuming and uncertain endeavor, resulting in increased litigation time and
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defendants to easily sidestep the constitutional spirit of diversity merely by
setting up a corporate headquarters in a specific state, at plaintiffs’ financial
and procedural expense.165
IV. CONCLUSION
The Hertz decision has certainly made administrative tasks simpler.
Potential parties to litigation will be able to more easily ascertain jurisdictional
issues from the outset. Determination of a corporation’s principal place of
business is now standardized across the nation. There is little argument that the
Supreme Court correctly interpreted the plain meaning of § 1332.
Nevertheless, there remains some question as to whether this strict application
of the nerve center test truly reflects the legislative intent behind the 1958
amendment and the framers’ motivation for including the diversity provision in
the Constitution. The Hertz opinion could have done more to protect the
constitutional integrity of diversity jurisdiction, which was intended only to
protect out-of-state litigants from local bias, a problem that does not plague
most large multistate corporations. In addition, the rule in Hertz confers a
financial and procedural benefit on corporate defendants, while at the same
time severely disadvantaging individual or small class action parties seeking
relief. The true intent of diversity jurisdiction was to level the playing field, not
to widen the gap between parties.
There is little doubt that the social and economic climate of the United States
in the twenty-first century differs vastly from that of the time of the
Constitution’s ratification. So too the manner in which business is conducted
has shifted; the arrival of the information age and the increased mobility of the
public at large has changed commerce to the extent that it will never be the
same. Regrettably, corporations remove cases simply so that they can litigate
under favorable procedural rules, rather than to avoid being subjected to bias as
an out-of-state defendant—the underlying rationale behind diversity
jurisdiction. In this sense, a corporation is no different than any other citizen
and should not receive preferential treatment in the judicial system simply due
to the nature of the corporate model.
Thomas G. Stanwood
the potential for appeals. See id.
165. See supra note 52 and accompanying text (illustrating manipulation of citizenship for diversity
purposes). There have been no provisions or amendments to § 1332 to prevent manipulation of corporate
citizenship via the location of a corporation’s nerve center. See Duffy & Daly, supra note 107, at 1. “Because
corporations continue to have exposure to state court litigation in their states of incorporation and principal
place of business, corporations can and should consider locating their headquarters in states with better and
fairer courts, and states with smaller populations, in order to contain and manage that exposure.” See id. at 3
(discussing corporate organization strategy in light of Hertz).